After the Election

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What does a Liberal minority mean for Canadians?

The 44^th Canadian federal election was held on September 20, 2021, and the results were mostly unchanged from the election in 2019. After two terms as governing party, the Liberal party won the election with minority status—once again—meaning they will require support from other parties to pass their mandates.

Below is a summary of the seat count won by each party, including the Liberals’ 159 seats—short of the 170 needed to form a majority government.

*338 riding, 170 seats to majority

With the election complete, now may be a good time to:

• Revisit the Liberal’s’ campaign promises to get a feel for what might be coming in the areas of investment, tax, retirement and estate planning legislation
• Review the 2021 federal budget for a reminder of which measures did not pass prior to the election and would require re-tabling once Parliament resumes
• Look at key priorities from other parties to get a sense of what they may require in exchange for their support to help the Liberals pass their mandates.

Without further ado, let’s jump into each of these topics below. I should note that campaign platforms contain a variety of revenue and spending measures, and the comments below focus only on those that are investment, tax, retirement or estate planning in nature.

Liberal campaign promises

To kick us off, let’s revisit the Liberal party’s campaign promises.

Taxation

• A new minimum tax to ensure that top earners (those earning more than $216,511 in 2021) pay at least 15% in taxes per year, preventing excessive use of deductions and credits
• Extend the Home Expense Deduction for an additional two years, through the 2022 tax year, and increase the deductible amount to $500 (from $400)
• Raise the corporate income tax rate for banks from 15% to 18% on all earnings above $1 billion and impose a temporary Canada Recovery Dividend
• Increase Canada Revenue Agency (CRA) resources by up to $1 billion per year to combat “aggressive tax planning and tax avoidance” and close the tax gap.

Housing

• Double the First-time Home Buyers Tax Credit from $5,000 to $10,000
• Introduce a First Home Savings Account to enable Canadians under 40 to save up to $40,000 toward their first home, with no tax on contributions or withdrawals
• Introduce an “anti-flipping tax” on the speculation of residential homes, requiring property to be held for at least 12 months
• Double the Home Accessibility Tax Credit to $20,000.

Seniors

• Implement a Career Extension Tax Credit, allowing working seniors age 65 and over who earn at least $5,000 to eliminate tax payable on a portion of their income and receive a tax credit of up to $1,650
• Introduce a Multigenerational Home Renovation Tax Credit to help families add a secondary unit to their home for an immediate or extended family member. Families will be able to claim a 15% tax credit for up to $50,000 in renovation and construction costs
• Increase the Guaranteed Income Supplement (GIS) by $500 for single seniors and $750 for couples starting at age 65.

Budget 2021: Announced measures that have not yet passed

The 2021 federal budget was ambitious to say the least. Let’s look at which items have not yet passed.

• Implement a tax on luxury cars, boats and planes. The tax would apply on the sale of new luxury cars and personal aircraft with a retail price of more than $100,000, and new boats that cost more than $250,000. The tax would be calculated at the lesser of 20% of the value above the thresholds or 10% of the full value of the asset.
• Impose an annual 1% national tax on non-resident, non-Canadian owners of vacant or underused housing (and vacant land within urban areas which was added to the proposal)
• Allow privately-owned, Canadian-controlled businesses to expense up to $1.5 million of “growth-enhancing investments” (i.e., software, patents and machinery)
• Introduce a Canada Disability Benefit, a direct monthly payment for low-income Canadians with disabilities aged 18 to 64
• Review the Disability Tax Credit, and other federal benefits and programs to make sure they’re accessible to those experiencing mental health challenges.

Support needed

Given their minority status, the Liberals will need support from other parties to pass their mandates. Support is likely to come from either the New Democratic Party (NDP) or Bloc Québécois given each party’s political orientation and number of seats won. Below are campaign measures from both the NDP and Bloc Québécois, which could be used in negotiations with the Liberals in exchange for their support.

NDP measures

• Raise the top marginal tax rate from 33% to 35% (applicable to income over approx. $216,000)
• Increase the capital gains inclusion rate from 50% to 75%
• Impose an annual 1% wealth tax on Canadian families with over $10 million in assets
• Increase the corporate tax rate from 15% to 18%
• Introduce a temporary COVID-19 excess profit tax that puts an additional 15% tax on large corporate profits during the pandemic
• Introduce a 20% foreign buyer’s tax on homes
• Expand income security programs to ensure Canadians living with a disability have a guaranteed livable income, and provide a guaranteed livable income for seniors
• Create a Pension Advisory Committee to develop a long-term plan to enhance the OAS, raise GIS and bolster the Canadian Pension Plan.

Bloc Québécois measures

• Reform employment insurance to better support all workers, including seasonal and gig workers
• Boost Old Age Security benefits by $110 a month for those aged 65 and up
• Provide a one-time $500 payment to seniors under the age of 75
• Provide more government assistance for small businesses, including those in Quebec’s tourism and hospitality sector hurt by the pandemic
• Develop a strategy to support local purchasing and help small businesses transition to digital
• Raise the federal minimum wage.

The path forward: Will the parties get along?

During the history of Canadian politics, including the recently elected minority government, there have been fourteen minority governments at the federal level since the first was elected in 1921. Because of the support needed from other parties to pass mandates, minority governments enjoy less stability than majority situations, and most minority governments have lasted less than two years.

Time will tell how well members of the 44^th Canadian Parliament work together to introduce legislation and govern. The duration of this minority government will certainly depend on their ability to do so.

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Published October 15, 2021